Before we begin, please note that today's discussion will contain forward-looking statements based on management's current assumptions and expectations, which are subject to various risks and uncertainties. These forward-looking statements, including expectations for our technology and product portfolio, our business plans and performance, our capital allocation priorities, market trends and opportunities, and our future financial results.

We assume no obligation to update these statements. Please refer to our annual report on Form 10-K and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations.

We will also make references to non-GAAP financial measures today. Reconciliations between the non-GAAP and comparable GAAP financial measures are included in the written materials posted in the Investor Relations section of our website.

With that, I'll turn the call over to David.

Thanks, Ivan. Good afternoon, and thank you for joining SanDisk's fiscal third quarter earnings call.

We delivered another strong quarter with excellent performance across all key metrics, reflecting the strength of the SanDisk franchise. Before turning to our end markets, I'd like to provide an update on a priority we previously outlined.

Last quarter, we were engaged in discussions with customers on multi-year supply partnerships, what we refer to as new business models, or NBMs. I am pleased to share that we have successfully advanced those conversations, with five multi-year partnerships signed so far.

These partnerships are structured to lock in committed supply for our customers and committed financials for SanDisk. Our customers' commitments are backed by firm financial guarantees.

These partnerships support durable, structurally higher earnings and a significantly more predictable and less cyclical business for SanDisk. We believe this marks a fundamental evolution of our business, which is centered on deeper customer alignment, enhanced visibility, and long-term value creation.

These NBMs reflect the strategic value of our world-class NAND technology, which is built on decades of innovation. The investment we've made in R&D and manufacturing, including tens of billions of dollars in cumulative capex and IP, have built the foundation for a powerful new business model in which we manage the full stack from front-end manufacturing through chip and system-level design to final back-end assembly and test.

Both the extension of our joint venture with Kioxia and the supply agreement for DRAM following our investment in Nanya further strengthen our supply chain resiliency. This leverage is enabling us to drive stronger customer engagement, allowing long-term conversations with partners who value technology performance and long-term supply assurance.

With increased engagement and the optionality across the portfolio, we can optimize our end market mix more effectively. Together, these transformations have resulted in a step change in what we believe to be sustainable gross margins, free cash flow generation, and earnings power in a market that we expect to grow in the double digits for the foreseeable future.

Data center is a clear example of this strategy in action, with revenue growing 233% sequentially. This milestone reflects years of preparation and our deliberate shift toward what is now the most strategic and fastest-growing end market.

While we have made substantial progress, there is significant growth opportunities ahead, driven by the fundamental shift in underlying infrastructure requirements of artificial intelligence. We are witnessing extraordinary growth, not just in model size, but in resulting token generation, the duration and complexity of model runs, and the increasing importance of context.

As AI models scale from billions to trillions of parameters, and deployments advance from simple inference to deep reasoning and increasingly autonomous agentic systems, NAND has become a critical component of the underlying infrastructure. Inference optimizations such as KV cache along with workloads like RAG require substantial, high-performance, low-latency flash to deliver real-time responsiveness and quality of user experience.

These workloads expand the amount of data that now needs to be stored on low-latency flash, which is well beyond the model itself, as systems must retain context, intermediate data, and large external datasets. As a result, NAND flash is emerging as the only economically viable solution to deliver that capacity, performance, and efficiency required to keep models accessible for real-time inference at scale.

This shift in understanding the critical nature of our technology comes at a time when our product differentiation is strongest, anchored in what has been recognized as an industry gold standard for NAND technology with BiCS8 and a broad, leading portfolio with TLC and QLC offerings. We are confident that our world-class product portfolio and technology leadership will continue to drive data center customers to see SanDisk as a partner of choice over the long term, and we are already seeing that preference translate into results.

Our fiscal third quarter revenue was enhanced by strong demand for our TLC-based enterprise SSD portfolio, which powers performance-intensive compute workloads where speed and latency are paramount. Looking ahead to the fiscal fourth quarter, we expect to begin shipping our QLC Stargate solutions for revenue, adding another layer of revenue growth.

Together, TLC and QLC serve distinct but complementary roles, reflecting how we are deliberately architecting our portfolio to meet evolving customer needs with our broad portfolio of AI-focused data center products. In edge, we are seeing a continued shift toward premium devices across both PC and smartphone markets.

These platforms are increasingly incorporating on-device capabilities, which are driving higher storage requirements and greater demand for high-performance solutions. As a result, our mix continues to shift to high-value configurations and customers that assign the appropriate value to our technology.

Consumer saw strong year-over-year revenue growth across all key storage categories and regions, despite evolving consumer industry dynamics. This performance was supported by our strong brand recognition and channel presence as we focused on the most financially attractive demand.

In February, we unveiled our next-generation portable SSD portfolio, designed to support faster, more demanding workflows in AI-enabled content creation. This launch reinforced our innovation and leadership in the SSD category, generating meaningful external visibility with coverage across multiple global media outlets.

We also continue to strengthen global consumer engagement through new, brand-led go-to-market activities, such as our Space to Hold More campaign, which is driving deeper customer connection by localizing global narratives and engaging diverse communities worldwide. Together, these efforts reflect our focus on our end markets and commitment to driving demand through brand recognition, product innovation, and strong go-to-market execution as we shift our portfolio toward higher-value opportunities and transition away from legacy upsell models.

Our broad end market exposure sets us apart, and we remain committed to serving customers across these markets. With that, I'll turn the call over to Luis to dive deeper into our financial performance and guidance.

Thank you, David. I will begin with an update on our new business models, or NBMs, which are designed to provide us with demand certainty and provide our customers with supply assurance.

We signed three agreements in the third quarter and an additional two so far in the fourth quarter, and we're currently in active negotiations with several other customers. These agreements are tailored to meet the needs of our customers and, in aggregate, provide us with demand certainty at financials that we expect will be consistent with our fiscal fourth quarter guidance.

The duration of this agreement varies, with the longest contract extending to five years. In aggregate, volume commitments increase during the life of the contracts, with quarterly commitments and a combination of fixed and variable pricing.

These agreements with variable pricing allow us to capture upside if prices rise, while allowing our customers some upside if prices decline over time. As you will see in our 10-Q, the three contracts signed during the quarter provide minimum contractual revenue of approximately $42 billion.

We will update you as we make more progress. Each contract is secured with financial guarantees that protect us if the purchase obligations are not fully performed by our customers.

In aggregate, the five agreements signed so far include financial guarantees that exceed $11 billion and include prepayments and other financial instruments managed by third-party financial institutions. Out of these agreements, $0.4 billion in prepayments are included in our Q3 balance sheet.

These five new business models account for over a third of our bits in fiscal year 2027, which we expect to increase as we conclude additional agreements over the next few months. We expect these new business models to reshape the historical cyclicality of our business, improving visibility and results in pricing and margins that reflect the value for our technology and investments, ultimately delivering higher, more consistent, and durable returns for shareholders.

Moving on to our results for the quarter. Revenue for the third quarter was $5,950 million, up 97% sequentially and up 251% year-over-year.

This compares favorably to our guidance of $4,400 to $4,800 million and was driven by both a mix shift towards higher-value customers and higher pricing. Our bits shipments were flat year-over-year and down high teens sequentially as we build higher inventory levels, primarily to support strong BiCS8 QLC demand in the fourth quarter Stargate ramp and to prepare for our recently signed new business models.

In line with our mid to high-teens growth model, bit shipments increased 18% fiscal year to date. Moving on to the end markets.

Sequentially, data center revenue grew 233% to $1,467 million, edge grew 118% to $3,663 million, and consumer came in at $820 million, down 10% in line with our historical seasonality. Our portfolio planning strategy focuses on delivering attractive long-term economics, with diversification remaining a core strength.

We remain committed to serving all three end markets to maximize long-term value creation. Our non-GAAP gross margin for the third quarter was 78.4%, up from 51.1% in the prior quarter.

This compares favorably to our guidance of 65% to 67% and was driven by our shift towards higher-value mix and the overall pricing environment. Non-GAAP operating expenses for the third quarter were $448 million and represent 7.5% of revenue, as compared to 13.7% of revenue in the prior quarter as we generate additional leverage.

This compares favorably to our guidance range of $450 to $470 million. As a result, non-GAAP operating margin were 70.9%, up from 37.5% in the prior quarter.

Non-GAAP EPS was $23.41, up from $6.20 in the prior quarter. This compares favorably to our guidance range of $12 to $14.

Key GAAP to non-GAAP reconciliation items include $20 million in stock-based compensation net of taxes, which represents 0.3% of revenue, and $46 million related to the write-off of unamortized issuance fees as a result of our prepayment of the remaining $650 million balance in our TLB. We closed the quarter with $3,735 million in cash and cash equivalents on our balance sheet.

Moving on to free cash flow. During the quarter, we generated $2,955 million in adjusted free cash flow, which represents an 49.7% margin.

Cash flow from operations came in at $3,038 million, partially offset by $83 million from net cash capital spending. Gross capital expenditures totaled $240 million and represented 4% of revenue.

Our capital plan is designed to balance growth opportunities and generate attractive returns, while supporting our ongoing BiCS8 transition. We remain highly disciplined in how we evaluate such investments to protect long-term sustainability of our business financials.

Moving on to guidance. For the fourth quarter, we forecast revenue between $7,750 million to $8,250 million from both bits growth and higher pricing.

Our forecast for non-GAAP gross margin is between 79% and 81%. We expect non-GAAP operating expenses between $480 and $500 million as we continue to invest in innovation and R&D.

We expect non-GAAP interest and other income between $10 and $30 million, and non-GAAP tax expenses between $775 and $875 million. We forecast non-GAAP EPS between $30 and $33, assuming 158 million fully diluted shares.

Moving to capital allocation. The priorities we outlined in February of last year were to invest in the business, achieve a net cash position, and then return cash to shareholders.

In line with these priorities, we have taken steps over the last two quarters to solidify our supply chain, including extending our JV with Kioxia through December 2034 and investing approximately $1 billion in Nanya to secure long-term DRAM supply. We have also taken actions that put us in a strong net cash position by paying off the remaining balance of our TLB.

Given the strong progress, today we're announcing that our board of directors has authorized a $6 billion share buyback program of outstanding shares of common stock. The repurchase authorization is effective immediately with no expiration date.

With that, I'll turn the call back to David for closing remarks.

Thank you, Luis. In summary, we continue to execute with conviction at a critical inflection point for this business.

NAND has always been a foundational technology, empowering the world's best-in-class semiconductor storage solutions required to drive the largest technological movements, including PC, mobile, cloud, and now artificial intelligence. Data center has become our fastest-growing market, and the workloads driving that demand, including inference, reasoning, and agentic systems, represent a structural and durable shift in how the world's most consequential technology is built and deployed.

Our new business models reflect this shift. Five signed agreements to date, over $11 billion in financial guarantees, and over a third of our bits in fiscal year 2027 under firm customer commitments represent a fundamental reshaping of our business, providing visibility, pricing protection, and more consistent, durable returns.

Our technology and product portfolio are intersecting this extraordinary demand at exactly the right moment. Equipped with a complete portfolio that now includes a scaled and rapidly growing enterprise SSD business, we are allocating supply to the highest-value opportunities and establishing a new pillar of growth for SanDisk.

This progress has converged in a single moment. We believe our margins are sustainable, we've achieved our net cash target, and we've announced plans to return capital to shareholders through buybacks, all while reinforcing our operational foundation.

Combined with our multi-year NBMs and the acceleration in the data center end market, this gives us both financial strength and structural resilience. The result is a durable growth model, a valuable franchise, and a business built to generate substantial, sustained cash flow.

With that, Ivan, let's see if there's any questions.

Thanks very much for taking my question, and congrats on another great quarter. Couple of quick questions here.

The EPS guidance you've given, $30 to $33, and these are all fantastic numbers. It does imply that the rate of price increase is slowing a bit into the current quarter.

I just wondered is either being conservative on your side cuz obviously we're still quite early in the quarter, or is that related to some of these very very long-term agreements that you've signed? With regards to the long-term agreements, I believe you mentioned about a third of bits for FY '27 in some kind of long-term agreement.

I'd like to ask to what degree is price fixed in the coming quarters just so I can get a kind of sense for that? Thank you very much.

Really appreciate it.

Hey, Mark. It's good to hear from you, and thanks for the comments.

First on next quarter and pricing, we don't really guide pricing, but I think you saw in FQ3 rather extraordinary pricing acceleration across the business. We're very happy about that.

You're right, it's early in the quarter, and it's an extremely dynamic market. It pays to be a bit conservative when you're going down that path, but we're very confident in the numbers.

The second part on the agreements, I'll make a few comments and Luis will have something to say as well. I think you were asking about pricing being fixed.

These agreements are really tailored to individual customers. They have different elements depending on the customer.

It depends on the length of the agreement. It really gives us some assurance on consistency of demand, which is really what we need.

Again, I've talked about this in the past, we need to get our customers' business model and our business model aligned. We run a fab.

We have very consistent output. We need very consistent consumption.

I think one of the major attributes of these agreements is they give us that. Our customers understand the dynamic very clearly when we talk it through.

It's one of the reasons why these agreements don't just happen overnight. It's not just about prepaying for a couple quarters worth of supply.

This is about establishing up to a five-year agreement on supply that's very consistent quarter-over-quarter. As we said, there's financial instruments in place that if that consumption does not happen on that very predictable time frame, then there's financial commitments that come to us immediately.

They are backed up, and they're very very strong. The pricing, like I said, it's set up where there's fixed elements, there's variable elements.

Maybe I'll let Luis talk about it in a little more detail.

I just want to reinforce what David was saying. These models are here to deliver durable, more predictable, more attractive, more consistent financial results.

They're very good and, frankly, it's a win-win for us and for our customers. We provide supply, they provide demand, and we have visibility for many years, all the way to five years.

We're very happy about that. I guess you've never heard about us talk about RPO, or remaining performance obligations, in this business, and we've started to talk about that, and you will see it in our 10-Q as we mention about $42 billion of RPO in this business.

We're very happy about that. The pricing, as we mentioned, it's a combination of fixed and variable.

To address your question directly, the shorter time you are within the contract, the more fixed it is. The longer out you go out, there will be more components of variable.

You could assume that most of the pricing that we're seeing in the very short term is mostly fixed, and then as you go out, there is a little bit more variable for us to capture upside, and for our customers to capture some upside if prices were to go down.

Thanks so much, really appreciate it.

Thanks, Mark.

Great. Thank you.

I wonder if you could talk about the growth in enterprise SSD that you saw. Pretty impressive.

How much of that is the market? How much of that is you guys kind of putting the product portfolio in a better place?

Like a lot of things when you see 233% sequential growth, Joe, there's a lot of elements of that to your point. It starts with the portfolio, right?

The portfolio is in great shape. This is almost exclusively our TLC product.

We're going to start shipping our Stargate product for revenue next quarter. Really really strong performance, very very strong product.

A broadening of qualifications. It takes a little while to get into a large number of accounts at this point.

Then, there is a strong market pull. There's no doubt about it.

There's a lot of demand in the market for these high-performance enterprise SSDs. We got the right product at the right time, and we're really happy to see this part of the portfolio now expand and getting to the levels where we expected to be.

It was 25% of the portfolio this quarter, and we expect that to increase as we go forward.

Helpful follow-up. Where do you see that in a few years?

It seems like that hyperscalers want everything you can make and then some. Just how much of the business could be enterprise in the long term?

It could be a significant amount. I think, Joe, you've known for a long time we value a balanced portfolio.

We want to mix in a way that gets the best financial return for us, and that changes quarter-over-quarter. I think the key point is we're in a position where we can mix into data center in a way that we've never been able to do before.

I expect that number to keep rising over the next several quarters and next several years to your point.

All right. Thank you.

Thanks.

Hey guys, it's great to be on board here. I almost feel like I'm on a software call here.

It's great to be speaking with you. David, you said 1/3 of bit growth next year is contracted.

Where do you see this going to based on your conversation? Should we expect that every year, it's 1/3 next year, but every year could this be above 50% where how much is kind of done going into the year?

Then I have a follow-up. Thanks.

Welcome. We're glad you're here.

It's good to hear your voice again. Look, I would say a couple of things to this.

One is we're still in a lot of conversations about how we're changing this business. It takes a while depending on the customer.

Some customers come into the conversation really concerned about multi-year supply agreements, and so it's an easier conversation. Other customers come into the conversation very used to the way the market has worked in the past where they commit volume and want to negotiate price every quarter.

That's not the kind of agreement we're interested in. We're interested in agreements that give us certainty of economics.

A key point of what Luis said in the script, want to make sure it's understood. There are fixed and variable elements of these agreements, but the five agreements we've signed, we're targeting financials that are in line with what we just forecasted too.

This is very very very attractive business. Now, Ben, we're still in active conversations for our supply going forward.

That includes next year all the way through the next five years. I expect the number we said at least a third, we're over a third, and I expect that number to go up over the next several quarters.

Where can it get to? I definitely think it can get above 50%, and but we'll see.

I think we can drive it actually quite high, and we have a desire to drive it quite high.

Great. Thanks.

Then just with regard to margins, David, do you feel like when you do these kind of agreements that you can lock in margins? Your stock's not trading as if you're going to stay at 80% anyway, but when you do these kind of things, is there a target margin, and would you be willing to kind of share what range at least it's in?

You could argue the stock's trading like your margin's going to go back into the 40s or something or something like that. Do you have a target margin that is in a range that you're comfortable talking about?

Thanks.

I don't think we're there yet to talk about that, Ben. When we get a little further along in this, we'll wrap this all up in a new model for everybody.

We're very proud of our technology. Let's put it that way.

I think we're finally for the first time in decades in this business getting to the point where the value of our technology is getting recognized, at least for us. Quite frankly, the value of our technology has been recognized in the market.

It's just other people have been collecting that value, and it hasn't been the producers. I think that now we're getting a more even distribution of that value.

We're not necessarily interested in trading away that value for certainty. We're interested in getting that value and getting certainty as well.

To your point, look, we understand how the franchise is valued, and we're very very focused on getting the cyclicality out of this business. It's corrosive.

It's corrosive to the way we invest our capex. It's corrosive to our customers' ability to get a sufficient amount of product to drive their spectacular businesses.

I think we've taken some very meaningful steps down this path now. We've got very significant commitments from very significant customers, and I think as we can continue to proceed down this path, we will move this entire business to a very different spot to everybody's benefit: our benefit, our investors' benefit, our customers' benefit, and their customers' benefit, because they're building just spectacular technology, and we're a key part of that.

I think we're on that journey. I think it was very questionable if we could even make that progress.

I've had a lot of people tell me in the last year, it's never going to happen. It's happening, but we're still in the early stages.

As we make continued progress, we'll continue to give everybody updates on that progress.

Thank you very much.

Thanks, Ben.

Good afternoon. Thanks for taking the question.

I guess curious to get your thoughts around supply-demand going forward for NAND. It's fairly interesting in the sense that we're getting only limited greenfield, mostly layer count driving bit growth, where new greenfield is really being prioritized for DRAM.

Within that kind of construct, as well as the agentic AI kind of incremental growth, how are you thinking about when the industry might get into balance?

I think, C.J., you know my point my point of view on this is the industry is always in balance, right? Markets always balance supply and demand.

I think the question is, implicit in your question of what I hear is if you lower the price, will you meet more demand? That's just we're we're kind of working around that whole environment.

Look, let me start on make a couple of points. On the demand side, we continue to see data center accelerate.

Before what we saw this week, we we we would raise even our calendar year '26 data center growth number to the mid-70s from where we were in the 60s just three months ago, which is up from the 40s three months before that and the 20s three months before that. We continue to see very very strong growth in the data center.

Outside of data center, we're we're seeing some contraction in the market just because of unit decline. That's to be expected, although we expect to see that bounce back in in '27.

Now on the supply side, like I think this is a a major major benefit of this franchise is that we can increase supply through nodal transitions, right? We have a very very productive R&D pipeline.

This is something we've invested in for a very very long time with our with our JV partner in the BiCS roadmap. We can continue to drive, the bit growth we're talking about, mid to high teens, through nodal transitions.

We don't need we need to add some cleanroom space because each node has more steps, and more steps is more tools, there is some additional capex. It's not like other markets that you reference where you actually have to add capacity because you're not getting that much from the nodal transition.

Quite frankly, I think this is what makes this franchise such a spectacular cash generator

is because the amount of capex we need to invest, especially capex as a percent of revenue, is continuing to go down substantially. The absolute capex is still there.

I'm just saying the relative to our revenue generation. We we've made all the investments in the nodal transitions.

We have years of we have years of of runway into what our nodes are going to be and what the bit growth is going to be from those. We will control we will continue to invest in those and drive those nodal transitions to grow the market in that that mid to high teens teens rate.

That's basically what we see what we see across the NAND across the NAND players, quite frankly.

Very helpful. I guess just real quickly in terms of capital structure, you're now no debt, $3.7 billion cash.

What do you think you need to retain given your view today and given kind of the new contracts that you're signing? Then how should we think about kind of buybacks from here?

Thank you.

We did announce a share buyback program with this call, right? We just announced a $6 billion buyback, and we'll keep on tracking our cash flow.

We're generating good cash, and as things change, and as we execute the share buyback program, we'll keep you updated, C.J.

Good afternoon, and thanks for taking my question. One more question on the new business models, if I could.

Could you maybe talk about whether any of the five largest US hyperscalers are included in those contracts thus far? Related to this on a go-forward basis, do you plan on providing any sort of ACV or in-year confirmed contract value as per your normal disclosures?

We're not going to disclose the names of our customers, but we have, as David said at the beginning, we have some very meaningful customers who are joining, and some more that we're working with, but we can't disclose the name of our customers. I think to your second part of your question, Jim, we will provide you this RPO metric, which I think is very interesting, which is how much of the business is already contracted, and that's based on minimum prices, right?

We will continue to give that information every quarter, and you'll have that visibility as we make progress quarter-over-quarter.

Thank you. Then maybe as a quick follow-up.

Could you maybe talk about, given these new business models and your visibility on customer demand, what is the state of your discussions with Kioxia in terms of potentially increasing bit supply? Are you contemplating anything above the sort of 20% range of growth that you've outlined previously?

Thank you.

We still have the same plans, and the conversations with Kioxia are always very robust and very ongoing, and the teams are working on this every single day. We have our BiCS8 transition plan that we've aligned on, and we're executing to it, and it's going extremely well.

Thank you.

Thanks, Jim.

Thanks, Jim.

Hi, this is Jake on for Aaron. Congrats on the great results, guys.

Just to start off looking at Stargate starting to ship for revenue in 4Q. Could you just give maybe some color on how meaningful that ramp could be over the next few quarters?

Look, there's two major major products in the data center space. I think we've talked about this a lot.

There's the compute-focused, what we consider kind of a compute-focused enterprise SSD, lower capacities, much higher speeds, interface speeds, and then there's much much higher densities. The progress we've seen so far in the portfolio is coming off of that compute-focused TLC drive, and now we're going to bring the whole QLC product to market, which has been under qualification with some major players for well over a year.

We're not going to forecast a specific market segment, but we're very proud of that product, and we think it's going to do quite well in the market.

Thanks. Then, maybe as a follow-on with some of the more powerful LLMs released over the past few weeks, I guess how are you thinking about the KV cache opportunity as we see agentic AI grow?

Has that meaningfully changed over the last few quarters, and maybe how customer discussions have changed there?

I think that we've advanced our understanding of that a lot over the last quarter or two since it became a major part of the conversation. I even think the team did a webinar on that, which we'd be happy to repeat if folks are interested.

I think when you really start to drill into that opportunity and you try and size it, it obviously gets very complicated very quickly. What are the number of concurrent sessions that are going to be run?

What's the average input tokens? What's cache hit ratios, storage durations?

There's a lot of elements to that, and I think what it says is kind of where you were going, which is we need to stay very close to our customers because they're the ones that are going to have all the detail on the infrastructure they're building. The ones that are doing infrastructure at scale are going to have the great insight into how are all those variables put together against the use cases they believe they're building to.

I think this just reinforces this business model question. As our customers go through those calculations and understand the significance of NAND that that could drive, that is a good foundation for the conversation about striking deals, two years, three years, five years in length that are very very substantial in the amount of demand.

We're talking about five five deals and more than a third of our portfolio. It's an extremely extremely dynamic situation.

I think these are all the things that go into kind of understanding where this market is right now and how fast it's moving. It's literally moving every single day.

Even for those of us on the inside of the market that see the data points literally hour over hour, it is moving very very rapidly as our customers really start to understand the dynamics of the infrastructure they're building. I think I feel very good about we've been able to stay very close to them.

They're obviously very close to our technology and our products. They're responding very positively to those products, and they understand that they're willing to commit years of purchasing with a financial model around that that is very attractive for us, and it gives them a very attractive attribute, which is guaranteed supply.

Then quite frankly, they're willing to put a very large financial commitment up that basically guarantees that ongoing demand. I think that's a very big part of what we're talking about.

I think that we've talked about these agreements a lot. We've gotten a lot of feedback from a whole lot of people.

There's a lot of sometimes talk in the market that they won't hold, they won't have teeth, all these kinds of things. I can tell you nothing can be further from the truth.

We have customers that are literally putting up billions of dollars of collateral and through various financial instruments that will survive for the life of these contracts. If they don't meet their obligations on consistent purchasing every quarter, then that financial commitment immediately comes to us as a compensation for that contract not being concluded.

I actually probably never expect to collect those because I think our customers are extremely serious about needing this product. I can tell you the normal case is we sign an agreement, and within weeks we're having a conversation about how we increase the amount of product we can get to them over that time frame.

A very dynamic market. Things are changing very quickly.

It does make it difficult to forecast and the things you see. You see the results we're able to put up, and they're significantly better than we thought they were three three three months before.

That's because the market's just moving very very quickly, and the pieces change literally day by day. What we're doing is we want to solve a whole bunch of issues for our business in this.

We know we have great technology. We've made enormously substantial investments in intellectual property.

We've been building the BiCS roadmap for decades. We have enormous investments in fabs, some of the largest fab complexes in the world with our JV partner.

We want to leverage all of that, get a fair return for our products, and get this cyclicality out of the business, because like I said, I think quite frankly, it's corrosive for everybody that's in this industry. I shouldn't say that.

I can't speak for everybody. I think what's happening is there are now very substantial customers that don't want to play the quarter-by-quarter price game.

They have spectacular businesses, and they understand that we provide a very important component to their spectacular business, and they want to make sure that they have the best products, which we believe we provide. We know we provide those.

They want them on a very consistent basis so they can continue to plan their own business. That is opening this opportunity I think to fundamentally change the way this business has worked over the last several decades.

Quite frankly, that's a lot of fun for us to do that, because customers are very happy with those agreements. We're very happy with them.

Like I said, I think everybody wins. I'm trying to figure out who doesn't win in this equation.

Far, every agreement we've signed, the customers have been thrilled to get to the point of actually getting it signed. Anyway, probably maybe, Jake, a little longer answer than you were looking for, but we feel very very good about where we're at, and we think that we're now starting down a path that is, as Ben said, quite frankly, there's lots of other technology industries that understand how to do this.

We're not reinventing the wheel. We're just using techniques that people associate with other businesses that are recurring revenue models.

Certainly well, not everybody. If you've run a whole bunch of technology business, you understand how recurring revenue works, and it's a very very powerful financial model.

We think we can bring it to our franchise.

Congrats again.

Thank you.

Oh, great. Thanks for taking my questions,

and great set of numbers here. Good to hear from you again.

David, I think I heard you say some client demands, maybe it was PCs or smartphones related, snapping back. You sounded optimistic on that into next year.

Wonder if you're seeing anything, whether it's edge, AI on edge devices that underpins your optimism here. In that same context, given that the demand-supply seems more tilted towards meeting hyperscaler demand, the data center demand, what gives you confidence that you can meet some of that client demand if it snaps back?

If I can squeeze one in more for Luis as well, capex, at one point there used to be obviously mid-teens as a percentage of revenues.

Obviously, your revenues are exploding here, we don't expect that same ratio. How should we think about that going forward?

Thank you.

Okay. Let me unpack that a little bit and see if I can help.

When we look at '27, we see definitely in PC, phones, units are down in both now, as you would expect. We see those flattening out to up slightly in '27 as kind of our internal view of the world.

Quite frankly, I think that that's just a reflection of market's ability to adapt, right? If you're in business, and I think especially the device business, those are spectacular companies, very very smart people that run them, and they understand how to change their portfolio mix, and what they need to do given the environment they're in to drive their spectacular business forward.

I think there's no doubt there's an adjustment process right now, and it's happening. I think we'll get through that, and I think we'll get back to a point where we're still going to see content per device increase this year.

At least on phones, PCs we've got it flat, and we'll see both of those start to inflect up next year while units are flat to up slightly. Now what will we supply?

That's an interesting question. We're going to supply the customers that we have agreements with.

That's the way we're starting to look at the market. I think this is the change that we've been talking about.

We're not going to wait till next year and see what the market gives us. We're talking to edge customers as well about these new business models, agreements that are multi-year agreements with all the characteristics we've talked about in the past: committed, growing demand; the same kind of structure we talked about for these first five.

Those customers understand their businesses extremely well. We're engaged in those kind of conversations.

We'll see if we reach the finish line on some of those. I'm sure we will.

That's how we'll have great insight into what their demand is because they will have told us, and they will have put a financial commitment behind it, which will allow us to plan a lot better what demand we're going to serve. We're kind of navigating out of this market where we just show up and kind of see what demand is and see what the price is, and then adjust our mix very rapidly.

We know how to do that, but where we'd rather go is the path we're down, which is customers commit to us what their demand is, and they commit it in a way that we can really count on it, and quite frankly, they can really count on us.

To your last question on capex, David just talked about our philosophy. We continue to invest towards kind of a mid-teens capacity growth over time.

What this translates to into dollars, obviously, you shouldn't think about it as percent of revenues, but more in dollars, is a little bit of an increase into the next several quarters as we did the easier conversions first, and the next conversions will be a little bit more expensive on a dollar basis to deliver that same kind of growth. Nothing dramatic, but just as you're modeling things, I would put in a little bit more higher capex as we transition, but not a change in our philosophy as David mentioned earlier.

Hi. Thanks, David and Luis.

Phenomenal set of results here. Just a quick question on the RPO and the financial guarantees that, I see your data center is already at $1.5 billion, so that's I can annualize $6 billion run rate on the data center side.

Is all the $11 billion and the $42 billion RPO mostly all in data center? Is that a fair assumption?

On to the pricing question on these guarantees, it's probably mark-to-market, you would assume, right? As you look out 2, 3 years, there has to be some benchmark to the market.

Is that fair? I have a follow-up.

We're not disclosing the customers, I leave it at that. If you look at the $42 billion, not a lot of companies would be able to do that.

That's our RPO, and that's the minimum contractual revenue that you would expect from the three deals that we signed before the end of the quarter, right? If you include the other five, that would be a larger number, and you will see that number in our next quarter, but it's not part of the 42.

If you think about the $11 billion, which I think is the second part of your question, there are different financial instruments that were used to protect us. There is a portion that is in prepayments and, as I mentioned in my prepared remarks, you will see that in the 10-Q.

That's somewhere around $400 million that you will see in our balance sheet, and there are other financial instruments, and that's probably as far as I can go, which are managed by third-party financial institutions that are triggered if there is a breach in the contract that doesn't go all the way to the end. That's kind of how it works, Vijay.

Got it. As you look at your NAND SSD roadmap, you have a pretty disruptive technology coming down the pipe in terms of high-bandwidth flash.

Any thoughts on how that's progressing, how that's going if you can give us some color? Thanks.

We're happy with how it's going. It's kind of steady as she goes.

We're having conversations with customers on how they would deploy it. We're building the technology, the NAND die itself, the controller.

We're still on the timeline we talked about earlier of having an actual NAND late this year, and look for more of a system with a controller early mid-next year.

Hey, guys. Good afternoon, and great results.

Maybe just following on that, I had a question about, you're hearing a lot more discussion about different memory tierings, maybe accelerators using more DRAM. I'm just kind of curious if you had any perspective, there was a previous question on KV cache, I think everybody just assumed there'd be a lot more hard SSDs to serve that, but I'm just kind of curious as you look at that future roadmap in different memory tiering, high-bandwidth flash fits into that.

I'm just kind of curious if there's any change over the last quarter or so on the thoughts of where that storage will be.

I don't Not real- I mean I think the the kind of tiering architecture that's, came out maybe a quarter ago is is is what's what's being deployed. High-bandwidth flash is again, it's not a necessarily a substitute for an enterprise SSD or something like that.

It's a way to bring a lot more density to inference in a little different way. We we'd we'd have to follow up on that with a little more detail, but look, we're we're seeing you can see it in our numbers.

We're just seeing an enormous amount of of pull on that portfolio of high-performance enterprise SSDs as the as these these architectures get deployed and inference starts to get deployed at scale. As we said in the prepared remarks, I mean NAND is just a big part of that architecture now, given the size of models, the size of KV cache, the context length, all these things, is you're NAND is the most scalable semiconductor technology in the world.

It's now front and center in Well, it's now a a critical component of that architecture, and we're seeing that be pulled through. I I still expect this will be refined as we go forward.

Again, this is why again why we're staying very close to our customers. Our customers are the ones that know that the the big customers that are deploying this at scale, they're I suspect they have Well, I know they have very very detailed insight into how they're going to scale this across a global franchise.

So, understanding what that is and what that means for demand on our product, I think that there's an enormous amount of work going on there, and that again, that's what's driving the demand signals that are years into the future for us and allowing us to align our business model around that demand.

Good afternoon. This is Victor Santiago on for Amit.

Thanks for squeezing me in. I wanted to ask about the Nanya investment and supply agreement last month.

Could you help us better understand the strategic rationale for it? Was that primarily to secure DRAM for access HBF or future memory products going forward?

As you have seen, our data center business is doing pretty well, and we just posted very interesting growth, and that's just with our TLC product, and a lot more to come as we continue to expand our business now with QLC and as we drive growth through our new business models. One of the key things that we need to have access is DRAM.

The partnership with Nanya provides an investment into the company and gives us preferential treatment of access to DRAM as well. That's the rationale.

Got it. Thank you.

As a follow-up, I believe you provided the duration on the longest contract that you signed, but could you give us an idea on what the average duration might be across the five deals you signed so far?

Frankly, we cannot get into that level of detail. I think the minimums we signed before were more shorter, but we're not giving an average.

I apologize for that, Victor.

I think, Victor, one thing we want a portfolio of deals, 1-year, 2-year, 3-year, 5-year, and so that they don't all end at the same time, and all those kinds of things, and we don't face cliffs. We have every expectation we'll renew some of these.

Some of the deals are for a certain number of years with options for more years. It's still a little bit early, but we're going about this where it's not just there's not a fixed template, right?

It depends on the customer. Every deal is kind of customized to specific customers, and as we get a little deeper into this, maybe we can have some of the conversations and some of the numbers you're asking for.

Right now, it's a little bit early for that.

Hi, thanks for taking my question. It's Ruplu filling in for Wamsi.

I just had two quick ones, one for Luis. On the long-term agreements, is there any restriction on when you can raise prices?

Is it allowing for annual price increases or are there certain conditions when you can raise prices? Then one for David, how do you see the interest in QLC flash trending, and how do you see the mix of TLC versus QLC trending over the next couple of quarters?

Sorry, I'm going to frustrate you a little bit. We can't go into pricing in detail for each of the contracts.

As I said at the beginning, there are some fixed-price components and some variable-pricing components, and it is very different depending on each of the agreements that we have. There is no kind of an overall answer overall on pricing.

TLC, QLC, if you looked across the whole portfolio, roughly 2/3 TLC, 1/3 QLC. If you looked at data center, obviously for us, it's predominantly TLC, and we'll be launching major QLC products next quarter.

There's a lot of demand for TLC, especially in the enterprise SSD space, given the inference architectures and some of the comments earlier around KV cache and how important it is and, quite frankly, how it can scale dramatically based on your assumptions of the use case you're serving. There's a very very strong demand on TLC.

That said, we expect our QLC products to do very well.

Just want to say thank you to everyone for joining the call today. Thank you for your support, and we look forward to speaking with you throughout the quarter.